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Whistleblower in Petters fraud learns sentence today

Deanna Coleman, the woman convicted of helping perpetrate the largest fraud in Minnesota history before turning on her boss, learns her fate today.

It was Coleman -- more than anyone else -- who helped put disgraced business tycoon Tom Petters in jail for more than 40 years. She exposed the $3.5 billion fraud led by her long-time mentor, friend and boss.

Coleman will be sentenced today for her leading role in that fraud, and she's hoping her leading role in Petters' prosecution will mean she won't spend even a day behind bars.

In September 2008, Petters, Coleman and others involved in a more than decade-long scam were worried it was unraveling. They figured it wouldn't be long before investors learned they were being conned, that the consumer electronics deals they thought they were financing were shams. The goods didn't exist; the deals, fakes.

Coleman and her fellow crooks worried they'd soon end up behind bars.

But Coleman, 44, headed to the U.S. Attorney's Office and cut a deal, agreeing to help federal agents nail Petters in exchange for leniency. The U.S Attorney's office says Coleman's testimony in court and other assistance was "mission critical" to ending the fraud and bringing participants to justice.

"Since she performed so well as a witness for the government, she's going to be nicely rewarded," said veteran Twin Cities defense attorney Bill Mauzy.

"If you have the government prosecutor as a cheerleader for the defendant at sentencing, the sentencing tends to go very well for the defendant."

Mauzy expects Coleman won't get more than a year in jail and may well just get probation with home detention, maybe six months or less in a halfway house.

Coleman has pleaded guilty to a single count of fraud and faces a maximum of five years in jail.

But government prosecutors have asked the court to impose a lesser sentence, one that reflects what they call Coleman's "remarkable and unique" assistance and cooperation. That included secretly taping hours and hours of damning conversations with Petters and others.

Neither prosecutors nor Coleman's attorney, Allan Caplan, would grant an interview for this story. But Caplan argues in court filings that giving Coleman any jail time would be an injustice and a mistake.

Caplan said sentencing Coleman to prison would send a message to potential whistleblowers that it's better to remain silent.

Coleman could have fled the country with millions of dollars to any of some 80 nations with no extradition agreements with the U.S., Caplan said, though most are third-world countries such as North Korea, Bangladesh, and Somalia.

Caplan said Coleman accepted responsibility for her crimes and that she ended up forfeiting essentially all of her possessions, as the government forced her to give back ill-gotten gains. Coleman is virtually penniless, Caplan said.

Prosecutors already gave Coleman a tremendous break by limiting the charges brought against her to one count of fraud.

Former federal prosecutor John Radsan says the Justice Department tries to create incentives for a defendant to accept responsibility.

"If you have a defendant who can help you against other defendants, in exchange for that cooperation, the risk or time that the defendant takes, we want to reward it," Radsan said.

Coleman's rewards show the value of being the first to cooperate with federal prosecutors.

"That's why there was a run to the courthouse in that case," says long-time Twin Cities defense attorney Ron Meshbesher.

"Once they found out she was talking, everybody ran to the courthouse, but it's really the first one in that gets the biggest break," he said.

Several other participants in the Petters' scam decided to cooperate with prosecutors and testify against Petters. Their attorneys argue Coleman is just as guilty as they are, but under sentencing guidelines three of those other cooperating witnesses face at least 17 years behind bars when they're sentenced in coming weeks.

The government says they should get some break for their cooperation but nothing like what they say Coleman deserves.